A growing appetite for risk in Europe was apparent on Tuesday morning, as the stream of positive economic data flowing from the US and Europe indicating that the contraction in the global economy might ease sooner than expected helped push credit derivative indices tighter.
The main iTraxx Europe index, which tracks the 125 most liquid names in the investment grade class, tightened by 4 basis points to trade at 108bps, down from 112bps late on Friday.
Similarly, the iTraxx Crossover index, made up of 45 mostly junk-rated entities, narrowed by 17bps to trade at 670bps by midday.
Both indices have tightened significantly from wide positions earlier in the year, as improving investor sentiment over the likelihood of an end to the economic downturn drives equities higher and the risk of corporate default is seen as less extreme.